This Morning: In Defense of Oracle, Adobe, Apple’s March Upside, FB Engagement

By Tiernan Ray

Here are some things going on this morning in your world of tech:

Shares of Oracle (ORCL) are down $1.07, or 2.7%, at $37.77, after the company yesterday afternoon missedfiscal Q3 revenue estimates, and delivered profit that was variously described as a beat or a miss, depending on whether the include foreign currency effects or not. The company saw better-than-expected results in its hardware sales growth, somewhat software on the software side of things. The outlook for this quartet was in line with consensus.

Nomura Equity Research‘s Rick Sherlund reiterates a Buy rating, and a $44 price target, writing that “hardware finally turned the corner and is beginning to grow.” Revenue growth will be “moderate” given some cannibalization of traditional software licenses by cloud computing growth, he writes “We continue to look for 4% or so growth next year with faster 8% – 10% EPS growth. As faster growth cloud revenues ramp up they are likely to cannibalize traditional on-premise business, so overall, we think growth should be moderate but shifting to a more favorable mix of business in the cloud which could drive some additional benefit to investor sentiment.”

And Israel Hernandez with MKM Partners reiterates a Buy rating, and a $41 price target, writing that “While software sales were a little light, we believe investors are likely to look past the quarter given accelerating cloud applications momentum, an improving hardware business and a solidly in-line 4Q outlook.”

However, Canaccord Genuity‘s Richard Davis, who has a Buy on the stock as well, and a $43 price target, writes that he is “inching toward a downgrade” given “respectable but unexceptional quarter against fairly easy comparisons.”

Shares of Adobe Systems (ADBE) are down $1.94 or 3%, at $66.58, despite yesterday beating fiscal Q1 expectations and forecasting this quarter higher as well, and despite several price target increases.

There are still concerns, it seems, about the multi-quarter transition the company is going through as its user base moves from the traditional license software model to the company’s “Creative Cloud” subscription format.

Cowen & Co.‘s Peter Goldmacher, who has an Outperform on the shares, raised his price target to $80 from $60, writing that “The fact that ADBE is taking CS off the price list in 2H14 means that margins will continue to decline making it impossible, in our view, to call a bottom in the model transition just yet.” However, “ADBE remains a top pick because it is one of the few reasonably valued secular growth stories in our coverage universe that generates material earnings.”

Morgan Stanley‘s Katy Huberty and Jerry Liu this mornign write that data on smartphone demand both for Apple (AAPL) and Samsung Electronics (005930KS) from the bank’s “AlphaWise Smartphone Tracker” is looking better this month than previously expected.

The authors write the upside for Apple in March has several factors, including “Supply chain production tends to lead Apple’s revenue recognition, so as iPhone production declines from its peak in C4Q13, demand could outstrip supply; New US carrier promotions in C1Q14 driving incremental demand vs. late 2013 when carriers strictly enforced their 24-month contract terms. See Exhibit 3 on the next page for a list of promotions year-to-date from the big 4 US carriers; Similarly, several large US retailers ran iPhone promotions this quarter, including Walmart and Best Buy.”

Apple shares are up $3.22, or 0.6%, at $534.62.

Speaking of smartphones, in case you missed it, the staff of Bloombergthis morning write that China Mobile (CHL) “faces a triple whammy of apps, iPhone subsidies and regulations that likely will cost the world’s largest carrier as much as $1.8 billion in profit this year.”

The authors contend the carrier “is contending with falling income as customers flock to free messaging applications such as Tencent Holdings Ltd.’s WeChat and buy Apple Inc. devices at a subsidized price.” New government taxes are also a headache for the world’s largest carrier, they write.

J.P. Morgan‘s Doug Anmuth reiterates an Overweight rating on shares of Facebook (FB), and an $80 price target, writing that the metrics for engagement on the company’s desktop and mobile properties remain “solid,” citing data from comScore.

“Facebook’s share remains at ~18% of overall Internet time and 22% of mobile time – excluding Instagram and Whatsapp,” in February, he observes. “Facebook’s total minutes on both desktop and mobile declined sequentially, which we believe is at least partially attributable to fewer days in the month. Anmuth is encouraged about what he believes is the company’s impending debut of video ads.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.